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CHUBB CUSTOM INSURANCE COMPANY v. UNITED SERVICES AUTOMOBILE

October 5, 2005.

CHUBB CUSTOM INSURANCE COMPANY, Plaintiff,
v.
UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant.



The opinion of the court was delivered by: ANNE THOMPSON, Senior District Judge

MEMORANDUM & ORDER

I. Introduction

This matter is before the Court on Defendant United Services Automobile Association's ("USAA") motion to dismiss Plaintiff Chubb Custom Insurance Company's ("Chubb") Amended Complaint for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and 12(h)(3). The Court has decided this motion based upon the submissions of the parties and without oral argument pursuant to Fed.R.Civ.P. 78. For the following reasons, Defendant's motion to dismiss is granted.

  II. Background

  On June 13, 2004, Plaintiff Chubb filed an action in this Court seeking a declaratory judgment that Plaintiff had no duty to indemnify Defendant USAA for claims from a class action lawsuit in Illinois state court. In its Amended Complaint, Plaintiff alleged that this Court had diversity jurisdiction over the action because Defendant is a Texas corporation, with its principal place of business in Texas, and Plaintiff is a Delaware corporation, with its principal place of business in New Jersey.

  On August 5, 2005, Defendant filed the present motion to dismiss. Defendant alleges that it is not a Texas corporation, but is instead a reciprocal interinsurance exchange, which should be treated like an unincorporated association for diversity jurisdiction purposes. Defendant argues that because it has members in all 50 states, it is a resident of all 50 states. As a result, Defendant contends that there can be no diversity of citizenship.

  III. Applicable Law

  A. Lack of Subject Matter Jurisdiction

  In reviewing a motion to dismiss based on a factual attack on subject matter jurisdiction, a court does not presume that the plaintiff's allegations are true. Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). Instead, a court "is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." Id. The plaintiff has the burden of proving that jurisdiction exists. Id. If a court finds that it does not have subject matter jurisdiction, then it must dismiss the action under Fed.R.Civ.P. 12(h)(3).

  Federal district courts have diversity jurisdiction over civil actions where the amount in controversy is more than $75,000, and where the action is between citizens of different states. 28 U.S.C. § 1332(a). For purposes of diversity jurisdiction, a corporation is treated as both a citizen of the state where it is incorporated, and of the state where it has its principal place of business. 28 U.S.C. § 1332(c). An unincorporated association, on the other hand, is treated as a citizen of each state where it has a member. Carlsberg Res. Corp. v. Cambria Sav. & Loan Ass'n, 554 F.2d 1254, 1258 (3d Cir. 1977).

  A reciprocal interinsurance exchange consists of a group of people, called subscribers or members, who cooperate to insure each other against designated risks. See 3 Couch on Ins. § 39:48 (2005). It is "something more than a partnership and something less than an insurance corporation." Id. Because a reciprocal interinsurance exchange has "no legal existence separate from its subscribers, [it] is therefore considered an unincorporated association." Lumberman's Underwriting Alliance v. Hills, 413 F. Supp. 1193, 1195 (W.D. Mo. 1976).

  B. Dismissal of Parties to Preserve Diversity Jurisdiction

  A district court may dismiss parties to keep diversity jurisdiction as long as those parties are not indispensable. Kerr v. Compagnie de Ultramar, 250 F.2d 860, 863 (3d Cir. 1958). A court decides whether a party is indispensable based on the context of each case. Provident Tradesmens Bank & ...


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